EXPLAINER: A Look at Money Market Funds as an Option for the Risk-Averse Short-Term Investor in Kenya

A money market fund is a kind of mutual fund that invests in highly-liquid, near-term instruments. Therefore, if you are an investor leaning towards liquidity, stability, and security of the capital you invest, money markets funds make a good entry in your investment journey.

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If you are interested in beginning your journey in investing, you are probably wary of a heavy or long-term commitment. Another challenge you may face is the lack of knowledge or who to reach out to and trust.

In such cases, one of the better options to introduce yourself into investing is through money market funds.

A money market fund is a kind of mutual fund that invests in highly-liquid, near-term instruments. Therefore, if you are an investor leaning towards liquidity, stability, and security of the capital you invest, money markets funds make a good entry in your investment journey.

Furthermore, you’ve got a fund manager to ensure that your funds are invested in a structured and organized manner instead of investing randomly.

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According to many financial analysts, money market funds are less risky and offer higher returns than traditional saving accounts. These funds invest in liquid securities that are short-term in nature, usually 13 months of less.

Examples of these securities include:

  • Cash
  • Top-rated debt-based securities
  • Cash equivalents

Most banks and financial institutions offer these funds and they offer a relatively straight-forward tutorial for anyone to join such funds.

In Kenya, institutions such as Britam, Cytonn and ICEA Lion are examples you can reach out to offering returns between 8 – 10 percent per annum.

In Kenya, there are 25 licensed Fund Managers by the Capital Markets Authority and at least 18 approved Money Market Funds. One example of such a money market fund is the SC Shilingi Funds by Kenya’s Standard Chartered Bank. 

SC Shilingi Funds is a platform that offers unit trust funds in Kenya Shillings from various provider(s). A unit trust pools contributions of many investors into one large fund (pooled fund), which can then be invested in a variety of financial products including money market, treasury and corporate bonds, shares and property. 

To highlight some of the advantages of these types of funds, we will look into the features of the SC Shilingi Funds.

Here are its features:

  • You can invest in SC Shilingi Funds with as low as 1,000 shillings up to 1 million shillings
  • The product is 100% digital and can be accessed 24/7 on the SC Mobile app. No paperwork is required
  • You can invest one-time anytime, weekly or monthly
  • Daily interest and compounding monthly
  • You also get unlimited free withdrawals at any time. The withdrawals take 1 to 3 working days once you place an order
  • You can withdraw your investment partially or fully at any time

Interest rates are calculated on a daily basis depending on the indicative interest rate published by the fund house. This rate is subject to change on a daily basis. The interest is then credited to your account as units every beginning of the month (within 3-5 days).

What better way to get introduced to investing!!

Disclaimer: This is not financial advice. All investors should do their due diligence before investing.

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RECOMMENDED READING: The Central Bank of Kenya Officially Publishes Regulations to Protect Consumers from Digital Lenders

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